Premier Investments (ASX:PMV) Has Announced That It Will Be Increasing Its Dividend To A$0.70

The board of Premier Investments Limited (ASX:PMV) has announced that it will be paying its dividend of A$0.70 on the 26th of July, an increased payment from last year's comparable dividend. Even though the dividend went up, the yield is still quite low at only 4.7%.

Check out our latest analysis for Premier Investments

Premier Investments Doesn't Earn Enough To Cover Its Payments

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Prior to this announcement, Premier Investments' dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

EPS is set to fall by 7.4% over the next 12 months. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 97%, which is definitely a bit high to be sustainable going forward.

Premier Investments Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of A$0.36 in 2013 to the most recent total annual payment of A$1.24. This means that it has been growing its distributions at 13% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Premier Investments has seen EPS rising for the last five years, at 21% per annum. Premier Investments is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

We Really Like Premier Investments' Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 14 analysts we track are forecasting for Premier Investments for free with public analyst estimates for the company. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.